Snapchat’s controversial redesign causing reduction in revenue

Snap’s stock price went down the drain during afterhours trading following the report of the first quarter earnings. The stock dropped by more than 15 percent or approximately one-sixth of its worth. Even though the app recorded an increase in global users by four million or thereabouts since the last quarter, it made less money per user.

During the previous quarter, the company made $1.53 per user globally, or $286 million in total revenue. This quarter, the returns per user has dropped to $1.21 per user and $231 million in revenue. That notwithstanding, is a major growth compared to what it made last year which was a quarterly revenue of $150 million. The CFO of the company, Drew Vollero, said that they expect an even further drop in quarterly revenue by the end of this second quarter. He said:

“As we think about our year-over-year revenue growth rates, we are planning for our Q2 growth rate to decelerate substantially from Q1 levels, with growth in auction impressions, partially offset by pricing for both Snap Ads and Creative Tools.”

The bad news came after an astonishingly good performance from Snap last year where its users and revenue grew to a significant extent. As a result, stocks grew by 25 percent. The lack of revenue growth according to our sources is attributed to implementation of Snap’s app redesign which according to the company would help users separate their personal lives and branded content. Those users nauseated when the redesign finally went live and filed a petition in an effort to get the company to return back to its old UI.

CEO Evan Spiegel acknowledged the discontent of users today and said, “a change this big to existing behavior comes with some disruption, especially given the high frequency of daily engagement of our community.” He says the team is now focusing on optimizing the design, like putting creators’ Stories and friends’ Stories to the right of the camera. (Snap moved friends’ Stories to the left of the camera to combine it with friend chats.) Spiegel also says the team is working on its Android app, which is “still a weakness.”